NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Laurent Ferrara

Banque de France
International Macroeconomics Division
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NBER Working Papers and Publications

May 2013Post-recession US Employment through the Lens of a Non-linear Okun's law
with Menzie D. Chinn, Valérie Mignon: w19047
This paper aims at investigating the relationship between employment and GDP in the United States. We disentangle trend and cyclical employment components by estimating a non-linear Okun's law based on a smooth transition error-correction model that simultaneously accounts for long-term relationships between growth and employment and short-run instability over the business cycle. Our findings based on out-of-sample conditional forecasts show that, since the exit of the 2008-09 recession, US employment is on average around 1% below the level implied by the long run output-employment relationship, meaning that about 1.2 million of the trend employment loss cannot be attributed to the identified cyclical factors.

Published: Journal of Macroeconomics Volume 42, December 2014, Pages 118–129 Cover image Explaining US employment growth after the great recession: The role of output–employment non-linearities Menzie Chinna, , , Laurent Ferrarab, , Valérie Mignonc,

 
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